Prior to working at FINRA, I worked for over three years in Merrill Lynch’s Wealth Management (a.k.a. financial advising) division in Washington, DC. I worked on a team that managed roughly $600 million at the time. I fondly remember each of my bosses and colleagues as hard working, family oriented, and good-hearted people.
One of my bosses (now retired) was a decorated Navy veteran who instilled and inspired a tireless work ethic while often times requesting that we all stop our work to hear a good joke. Another teammate - initially a tough cookie to crack - became a shoulder to lean on and a person who provided advice and guidance, both professional and personal. I could go on and on about each of the five people (three of them still remain on the team) on my team, but needless to say, working with them was a crash course on accountability and teamwork.
Although I was fortunate to be on a great team, I also worked at Merrill during the worst financial crisis and stock market crash since the Great Depression in the 1930s. This crash was due in part to Merrill, a company whose drive for profit consumed them to the brink of collapse, whose CEOs became notorious and greedy (a $35,000 toilet!?) and instilled a corrosive “money first, client second” Wall Street culture that I witnessed first hand in sales meetings and other interactions with other employees.
One of my roles at Merrill was to answer our clients’ phone calls, solving problems and issues, chatting about the market, and ultimately, developing relationships with them. These relationships became very strained when the crash occurred, particularly with our clients that were reading the papers and understood Merrill’s role in the crash. I had to speak to client after client, trying to explain why their portfolio was down 30% - 50% and who was to blame. I distinctly remember one of my own clients (by this time I had passed my Series 7 and Series 66 licenses and was acting as a financial advisor) asking me to explain how a retired couple in their mid-70s was supposed to recoup these staggering losses and live on a budget they never anticipated. I had no answers.
Over time, the many different causes of the crash became more and more apparent, and I became determined to work for a financial regulator, applying to both the SEC and FINRA. As idealistic as it sounds, I hoped to help prevent another one of these catastrophic financial disasters1. In 2010, FINRA hired me to work in the Florida district office located in Boca Raton, Florida.
Welcome to Del Boca Vista!
Upon arriving in FL, I quickly realized this area was not a sleepy enclave of retirees and late night readings of the Boca Breeze; instead, South Florida was one of the worst areas in the country from a regulatory perspective, ripe in elder abuse, penny stock fraudsters, money laundering, and all sorts of other problems that threw me into the deep end of regulation.
I had to learn fast and understand that these types of cases were developed by questioning everything. One of my first big cases involved a very small firm with almost no previous revenue that was suddenly paid around $7 million for introducing two corporate companies tied to high-risk foreign governments to swap a bond for hundreds of millions of dollars. Red flags of corruption were flapping in the wind.
Immediately upon the closing of this bond swap transaction, the CEO of the small firm received millions as did the small firm’s owner who was located in one of the high-risk countries. Because of frustrating jurisdictional and rulebook restraints, we had to refer this case to a more powerful regulator with subpoena power. Nothing came of it, and I learned a valuable lesson on the legal difficulties involved in bringing a case.
Despite hitting a dead end on that case, it jumpstarted my career and helped me get assigned to other high-risk cases which led me to rise the ranks at FINRA from Senior Examiner to Associate Principal Examiner to Principal Examiner to Principal Examiner of the Anti-Money Laundering Investigative Unit (“AMLIU”) to Manager of the AMLIU. (This promotion track can be read in more detail on my LinkedIn page.)
Investigations, Depositions, Settlements, Testimonies, Hearings, Oh My!
My time at FINRA was filled with depositions, settlements, two hearings, and two testimonies as the lead investigator on those cases. I was continually challenged at FINRA with more and more complex cases. By the end of my time, the bond swap transaction detailed above seemed like a walk in the park compared to later cases involving fraud, market manipulation, and money laundering.
Listing of My Cases
I am including links to the 14 formal cases that I investigated that resulted in $35,072,500 in fines, six individuals suspended from the industry, two individuals barred from the industry, one firm withdrawing from the industry, and one firm expelled from the industry1.
Each link* sends you to the public document that details the violations and facts of each case.
This list does not include at least eight other cases I was lead investigator or manager on that are still in progress as either formal cases, cases in settlement negotiations, or cases going to a hearing. I strongly believe that each of these nine cases will result in six to seven figure fines, and that a number of these cases will result in individual suspensions and bars and at least one to two firms being barred from the industry for fraud2.
- Brown Brothers Harriman & Co. - $8,000,000 fine and one individual was suspended for six months and personally fined $25,000 (Case Number 2013035821401).
- BMA Securities - $325,000 fine and one individual, Burt Martin Arnold, was suspended for one month and personally fined $20,000 (Case Number 2010023220502).
- Capital Guardian, LLC - $125,000 fine and one individual was suspended for three months and personally fined $5,000 (Case Number 2013035775302).
- Convergex Execution Solutions LLC - $3,000,000 fine (Case Number 2014040667001).
- Credit Suisse Securities LLC - $16,500,000 fine (Case Number 2013038726101).
- First Allied Securities - One individual suspended and personally fined $7,500 (Case Number 2013035076201).
- Geoffrey Richards Securities Corp. - $40,000 fine (Case Number 2012030485701).
- Glendale Securities - Complaint alleging fraud and market manipulation, unlawful resale of securities, anti-money laundering violations, and supervisory deficiencies. Sanctions pending a settlement or hearing (Case Number 2016049565901).
- Merriman Capital, Inc. - Expelled from the industry.
- Scottsdale Capital Advisors Corporation - $1,500,000 fine, one individual barred in all capacities, and two individuals each suspended for two years and each personally fined $50,000 (Case Number 2014041724601 - OHO Decision and NAC decision from appeal which holds all findings).
- Tradestation Securities, Inc. - $200,000 fine (Case Number 2010023934201).
- UBS Securities and UBS Financial Services - $5,000,000 fine (2012034427001).
- Underhill Securities and Frank Underhill - The firm withdrew its registration in the financial industry and Frank Underhill was barred in all capacities.
- VectorGlobal WMG, Inc. - $125,000 fine (Case Number 2011029215701).
Time Well Spent
My seven years at FINRA were an incredible experience where I was constantly challenged to produce results and rid the industry of bad actors and firms, and I can only thank my bosses and teammates for teaching me and leading me throughout this entire journey.
I worked to protect the financial markets for seven years, and I hope that my results and unblemished record give my potential clients reason to trust my integrity and help remove the corrupt, unethical, and unjust people inhabiting their financial world.
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1 - Of course, I realized the role (and failures) that financial regulators had in the financial crisis. One of the essential publications in the aftermath of the crisis was the SEC’s report Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme, something I later recommended our new examiners at FINRA read to understand the failures. I also thoroughly enjoyed Joe Nocera and Bethany McLean’s All the Devils Are Here (an article I cited in this post, “Blundering Herd,” is an excerpt from this book) and Alan S. Binder’s After the Music Stopped: The Financial Crisis, The Response, and the Work Ahead, but no book was a better account and simplified explanation of the crash and its causes than Michael Lewis’ The Big Short.
2 - The reason I highlight formal cases as opposed to all of the informal cases I worked on is that the amount of work on a formal case is notably larger than an informal case. Additionally, a formal case is significantly harder to accomplish because it involves developing a case from nothing by obtaining evidence of wrongdoing, deposing all of the individuals involved and/or responsible, drafting a report to our attorneys detailing the entire investigation and what rules were allegedly broken, and then if a case does not settle, preparing for and partaking in a hearing. A formal case usually take years to cross the finish line.
3 - When the results of these cases become public, I will update this post accordingly.